AXIS REAL ESTATE INVESTMENT TRUST (“AXIS-REIT” OR “FUND”)
(i)
Proposed acquisitions by OSK Trustees Berhad (“Trustee”), on behalf of Axis-REIT of the
following:
(a)
a parcel of leasehold land held under H.S.(D) No. 4568, Lot No. PT 3609, Mukim Telok
Panglima Garang, District of Kuala Langat, State of Selangor Darul Ehsan together
with all the industrial buildings erected thereon for a cash consideration of
RM85,000,000; and
(b)
a parcel of leasehold land held under H.S.(D) 167497, PT No. 13, Town of Petaling Jaya,
District of Petaling, State of Selangor Darul Ehsan together with all the industrial
buildings erected thereon for a cash consideration of RM49,000,000;
(ii)
Proposed placement of up to 68,819,800 new units in Axis-REIT, representing about 22.4% of
the existing units in Axis-REIT (“Units”) in circulation, at a price to be determined later; and
(iii)
Proposed increase in the existing approved fund size of Axis-REIT from 307,081,200 Units up
to a maximum of 375,901,000 Units
1.
INTRODUCTION
On behalf of the Board of Directors of Axis REIT Managers Berhad (“Board”), the management
company of Axis-REIT (“Manager”), Maybank Investment Bank Berhad (“Maybank IB”) wishes to
announce that on 3 June 2010, the Trustee, on behalf of Axis-REIT, entered into the following
conditional agreements:
(i)
sale and purchase agreement with Corporate Landmarks Sdn Bhd (“CLSB”) for the
acquisition of a parcel of leasehold land held under H.S.(D) No. 4568, Lot No. PT 3609,
Mukim Telok Panglima Garang, District of Kuala Langat, State of Selangor Darul Ehsan
together with all the industrial buildings erected thereon (“Axis PDI Centre”) for a cash
consideration of RM85,000,000 (“Axis PDI Centre Agreement”) (“Proposed Axis PDI
Centre Acquisition”); and
(ii)
sale and purchase agreement with Dazzling Township Sdn Bhd (“DTSB”) for the acquisition
of a parcel of leasehold land held under H.S.(D) 167497, PT No. 13, Town of Petaling Jaya,
District of Petaling, State of Selangor Darul Ehsan together with all the industrial buildings
erected thereon (“Axis Technology Centre”) for a cash consideration of RM49,000,000
(“Axis Technology Centre Agreement”) (“Proposed Axis Technology Centre
Acquisition”).
(The Proposed Axis PDI Centre Acquisition and Proposed Axis Technology Centre Acquisition are
collectively referred to as “Proposed Acquisitions”).
In addition, Maybank IB wishes to announce that the Fund also proposes to undertake the following:
(i)
proposed placement of up to 68,819,800 new Units (“Final Tranche Placement Units”),
representing about 22.4% of the existing Units in circulation, at a price to be determined later
(“Final Tranche Proposed Placement”); and
(ii)
proposed increase in the existing approved fund size of Axis-REIT from 307,081,200 Units up
to a maximum of 375,901,000 Units (“Proposed Increase In Fund Size”).
(The Proposed Acquisitions, Final Tranche Proposed Placement and Proposed Increase In Fund Size
are collectively referred to as “Proposals”).
2.
DETAILS OF THE PROPOSED ACQUISITIONS
2.1
Proposed Axis PDI Centre Acquisition
2.1.1
The Proposed Axis PDI Centre Acquisition involves the acquisition by the Trustee, on
behalf of the Fund, of Axis PDI Centre from CLSB for a cash consideration of
RM85,000,000 (“Purchase Price of Axis PDI Centre”).
2.1.2
The Purchase Price of Axis PDI Centre was arrived at on a willing-buyer willing-seller
basis at a discount of 7.61% to the market value of the Axis PDI Centre of
RM92,000,000 as appraised by PA International Property Consultants (KL) Sdn Bhd
(“PA International”) (being the independent registered valuer appointed by the
Manager, on behalf of the Fund). PA International has, in its valuation report dated 3
May 2010, assessed the market value of Axis PDI Centre at RM92,000,000 using the
investment method and cost method.
2.1.3
Axis-REIT will satisfy the Purchase Price of Axis PDI Centre in cash, which will be
paid in the following manner:
(i)
a sum of RM1,700,000 being the refundable earnest deposit and towards
part payment of the Purchase Price of Axis PDI Centre, has been paid to the
Trustee’s solicitors as stakeholders prior to the date of the Axis PDI Centre
Agreement;
(ii)
a sum of RM6,800,000 shall be paid by the Trustee to CLSB on the date on
which the last condition precedent to the Axis PDI Centre Agreement is
fulfilled or complied with in accordance with the terms of the Axis PDI Centre
Agreement (“Unconditional Date of Axis PDI Centre Agreement”); and
(iii)
the balance of the Purchase Price of Axis PDI Centre amounting to
RM76,500,000 (“Balance Purchase Price of Axis PDI Centre”) shall be
paid to CLSB’s solicitors as stakeholders within 3 months from the
Unconditional Date of Axis PDI Centre Agreement (“Completion Period of
Axis PDI Centre Agreement”) with a further extension of 30 days from the
expiry of the Completion Period of Axis PDI Centre Agreement subject to
interest at the rate of 8% per annum on the sum remaining unpaid.
The date on which the Balance Purchase Price of Axis PDI Centre (together with
interest, if any) is paid to CLSB’s solicitors shall be deemed to be the date the
Balance Purchase Price of Axis PDI Centre is duly received by CLSB (“Completion
Date of Proposed Axis PDI Centre Acquisition”).
Axis-REIT intends to fund the purchase consideration entirely through borrowings.
2.1.4
The other salient terms of the Axis PDI Centre Agreement are as follows:
(i)
The completion of the Proposed Axis PDI Centre Acquisition is subject to the
following conditions:
(a)
the Axis PDI Centre is free from all encumbrances;
(b)
that the category of land use shall on the Completion Date of
Proposed Axis PDI Centre Acquisition remain as “Perusahaan”;
(ii)
(c)
the execution of the deed of revocation of the existing lease
agreement and the new lease with the lessee, Konsortium Logistik
Berhad (“KLB”), within the Conditions Precedent Period of Axis PDI
Centre Agreement (as defined in Section 2.1.4(ii) below) or within the
extended period of 3 months from the expiry date of the Conditions
Precedent Period of Axis PDI Centre Agreement or such further
period as may be mutually agreed upon in writing between the
Trustee and CLSB, to be effective on the Completion Date of
Proposed Axis PDI Centre Acquisition;
(d)
there is no change to the existing category of land use affecting the
Axis PDI Centre;
(e)
the Axis PDI Centre is sold on “as is where is” basis, in its condition
and state of repair, as at the date of the Axis PDI Centre Agreement,
subject to the said repairs and rectification works stipulated in the
Axis PDI Centre Agreement (“Repairs of Axis PDI Centre”) being
effected and completed by CLSB within the Conditions Precedent
Period of Axis PDI Centre Agreement and there being no material
changes to the state, condition and appearance of the Axis PDI
Centre as at the Completion Date of Proposed Axis PDI Centre
Acquisition (fair wear and tear excepted);
(f)
that the certificate of completion and compliance (“CCC”) has been
duly issued for the Axis PDI Centre and all renovations, extensions
or modifications effected thereon have been carried out in
accordance with specifications of the approved building plans and
the relevant building by-laws; and
(g)
reliance by the Trustee on each and all of CLSB’s representations,
warranties and undertakings stipulated in the Axis PDI Centre
Agreement in respect of the Axis PDI Centre and existing lease and
the same remain true, accurate and binding in all material respects
up to the Completion Date of Proposed Axis PDI Centre Acquisition
and deemed repeated on and after the Completion Date of Proposed
Axis PDI Centre Acquisition for as long as may be necessary to give
effect thereto; and
CLSB shall not be obliged to complete the sale of, and the Trustee shall not
be obliged to complete the purchase of the Axis PDI Centre unless and until
all the following conditions precedent have been satisfied on or before 31
December 2010 (“Conditions Precedent Period of Axis PDI Centre
Agreement”):
(a)
the consent for the transfer of the Axis PDI Centre from CLSB in
favour of the Trustee to be obtained from Pihak Berkuasa Negeri
Selangor by CLSB, at its own cost and expense, for the transfer of
the Axis PDI Centre in favour of the Trustee;
(b)
the CCC having been duly issued for the Axis PDI Centre in
accordance with the approved building plans;
(c)
CLSB shall cause KLB to execute a deed of revocation upon terms
mutually agreed between CLSB and KLB, effectively revoking the
existing lease agreement and the new lease agreement being
deposited with the Trustee’s solicitors as stakeholders;
(d)
the consent of the chargee for the sale of the Axis PDI Centre by
CLSB to the Trustee;
(e)
the approval of the unitholders of Axis-REIT (“Unitholders”) by way
of an ordinary resolution at a Unitholders’ meeting to be convened
for the Proposed Axis PDI Centre Acquisition;
(f)
the Trustee obtaining the approvals for the Final Tranche Proposed
Placement from Bursa Malaysia Securities Berhad (“Bursa
Securities”) and the Unitholders, and upon the successful
placement of the Final Tranche Placement Units and the proceeds
from the Final Tranche Proposed Placement being duly received by
the Trustee by 31 December 2010;
(g)
the approval of the shareholders in general meeting of CLSB for the
sale of the Axis PDI Centre to the Trustee upon the terms and
conditions of the Axis PDI Centre Agreement (if required) or CLSB’s
company secretary’s confirmation that the members’ approval is not
required for the sale of the Axis PDI Centre;
(h)
CLSB’s board of directors’ resolution approving the sale of the Axis
PDI Centre to the Trustee upon the terms and conditions of the Axis
PDI Centre Agreement;
(i)
the Repairs of Axis PDI Centre being completed by CLSB to the
reasonable satisfaction of the Trustee; and
(j)
the approval, consent or authorisation of any other relevant authority
and/or parties not specifically mentioned above (if required) as may
be advised by the Trustee’s solicitors to CLSB’s solicitors within 3
months from the date of Axis PDI Centre Agreement, failing which it
shall be deemed that no such additional approvals or consents from
authorities are required for the sale and purchase of the Axis PDI
Centre.
2.1.5
Other than as disclosed in Sections 2.1.3 and 2.1.4 above, Axis-REIT will not be
assuming any liability (including contingent liabilities and guarantees) under the
Proposed Axis PDI Centre Acquisition.
2.1.6
The Fund does not need to incur any additional financial commitment to put Axis PDI
Centre on-stream.
2.1.7
Axis PDI Centre consists of a parcel of improved industrial land erected with a singlestorey pre-delivery and inspection building with an integral double-storey office, a
single-storey car repair building, car storage areas and other ancillary buildings with
gross floor area of about 5,389 square metres (equivalent to 58,009 square feet).
Other pertinent information on Axis PDI Centre is as follows:
Postal address
:
Lot No. 7316, off Jalan Klang/Banting
within Locality of Sijangkang
42500 Telok Panglima Garang
Selangor Darul Ehsan
Land title details
:
H.S.(D) No. 4568, Lot No. PT 3609, Mukim Telok
Panglima Garang, District of Kuala Langat, State of
Selangor Darul Ehsan
Tenure
:
Leasehold for 99 years, expiring on 10 August 2091
(i.e. an unexpired term of 81 years remaining)
Title land area
:
About 202,343 square metres
Surveyed land area
:
195,412 square metres (1)
Registered owner
:
CLSB
Approximate age of building
:
Newly completed: less than a year
Gross floor area/Net lettable area
:
About 5,389 square metres (equivalent to 58,009
square feet)
Category of land use
:
Industrial
Property use
:
Pre-delivery and inspection centre
Cost of investment/Net book
value
:
RM35 million (including enhancements and expansion)
based on the unaudited financial statements of CLSB
for the financial year ended 31 December 2009.
However, as at 31 December 2009, the construction
has just begun and the total cost of investment upon
the completion of the said construction is estimated to
be about RM60 million
Encumbrances
:
Charged to Affin Islamic Bank Berhad vide
Presentation No. 27756/2010, which was registered on
25 March 2010
Restriction in interest
:
The land cannot be transferred, leased or charged
unless with the consent from the state authority (2)
Average occupancy rate
:
100% for the period ended 31 May 2010
Tenancy description
:
Fully leased to KLB for a lease period of 5 years
commencing on 1 April 2010 at a monthly rental of
RM715,000 per month and with an option to renew for
an additional period of 5 years. Rental rate for the
option period will be based on the prevailing market
rate to be negotiated and mutually agreed upon by the
parties.
Net yield before Islamic financing
cost
:
9.5% per annum
(1)
Notes:
(1)
The Axis PDI Centre contains a surveyed land area of 195,412 square metres as per the
Certified Plan No. 70823. Hence, PA International had adopted the said surveyed land area in its
valuation.
(2)
For the purpose of the valuation, PA International has assumed that such consent will not be
unreasonably withheld by the state authority.
2.2
Proposed Axis Technology Centre Acquisition
2.2.1
The Proposed Axis Technology Centre Acquisition involves the acquisition by the
Trustee, on behalf of the Fund, of Axis Technology Centre from DTSB for a cash
consideration of RM49,000,000 (“Purchase Price of Axis Technology Centre”).
2.2.2
The Purchase Price of Axis Technology Centre was arrived at on a willing-buyer
willing-seller basis at a discount of 5.77% to the market value of the Axis Technology
Centre of RM52,000,000 as appraised by PA International (being the independent
registered valuer appointed by the Manager, on behalf of the Fund). PA International
has, in its valuation report dated 4 May 2010, assessed the market value of Axis
Technology Centre at RM52,000,000 using the investment method and comparison
method.
2.2.3
Axis-REIT will satisfy the Purchase Price of Axis Technology Centre in cash, which
will be paid in the following manner:
(i)
a sum of RM980,000 being the refundable earnest deposit and towards part
payment of the Purchase Price of Axis Technology Centre, has been paid to
the Trustee’s solicitors as stakeholders prior to the date of the Axis
Technology Centre Agreement;
(ii)
a sum of RM3,920,000 shall be paid by the Trustee to DTSB on the date on
which the last condition precedent to the Axis Technology Centre Agreement
is fulfilled or complied with in accordance with the terms of the Axis
Technology Centre Agreement (“Unconditional Date of Axis Technology
Centre Agreement”); and
(iii)
the balance of the Purchase Price of Axis Technology Centre amounting to
RM44,100,000 (“Balance Purchase Price of Axis Technology Centre”)
shall be paid to DTSB’s solicitors as stakeholders within 3 months from the
Unconditional Date of Axis Technology Centre Agreement (“Completion
Period of Axis Technology Centre Agreement”) with a further extension of
30 days from the expiry of the Completion Period of Axis Technology Centre
Agreement subject to interest at the rate of 8% per annum on the sum
remaining unpaid.
The date on which the Balance Purchase Price of Axis Technology Centre (together
with interest, if any) is paid to DTSB’s solicitors shall be deemed to be the date the
Balance Purchase Price of Axis Technology Centre is duly received by DTSB
(“Completion Date of Proposed Axis Technology Centre Acquisition”).
Axis-REIT intends to fund the purchase consideration entirely through borrowings.
2.2.4
The other salient terms of the Axis Technology Centre Agreement are as follows:
(i)
The completion of the Proposed Axis Technology Centre Acquisition is
subject to the following conditions:
(a)
the Axis Technology Centre is free from all encumbrances;
(b)
the successful novation of all the existing lease agreements and
existing tenancy agreements and the novation agreements to
commence on the Completion Date of Proposed Axis Technology
Centre Acquisition;
(ii)
(c)
the execution of the tenancy agreement with DTSB in respect of the
vacant office, warehouse and car parks, in escrow upon the
execution of the Axis Technology Centre Agreement to be effective
on the Completion Date of Proposed Axis Technology Centre
Acquisition which shall then be deposited with the Trustee’s solicitors
as stakeholders subject to the terms and conditions of the Axis
Technology Centre Agreement;
(d)
there is no change to the existing category of land use affecting the
Axis Technology Centre;
(e)
the Axis Technology Centre is sold on “as is where is” basis, in its
condition and state of repair, as at the date of the Axis Technology
Centre Agreement, subject to the said repairs and rectification works
stipulated in the Axis Technology Centre Agreement (“Repairs of
Axis Technology Centre”) being effected and completed by DTSB
within the Conditions Precedent Period of Axis Technology Centre
Agreement (as defined in Section 2.2.4(ii) below) and there being no
material changes to the state, condition and appearance of the Axis
Technology Centre as at the Completion Date of Proposed Axis
Technology Centre Acquisition (fair wear and tear excepted);
(f)
that the certificate of fitness for occupation has been duly issued for
the Axis Technology Centre and all renovations, extensions or
modifications effected thereon have been carried out in accordance
with specifications of the approved building plans and the relevant
building by-laws; and
(g)
reliance by the Trustee on each and all of the DTSB’s
representations, warranties and undertakings stipulated in the Axis
Technology Centre Agreement in respect of the Axis Technology
Centre, existing tenancies and existing leases and the same remain
true, accurate and binding in all material respects up to the
Completion Date of Proposed Axis Technology Centre Acquisition
and deemed repeated on and after the Completion Date of Proposed
Axis Technology Centre Acquisition for as long as may be necessary
to give effect thereto; and
DTSB shall not be obliged to complete the sale of, and the Trustee shall not
be obliged to complete the purchase of the Axis Technology Centre unless
and until all the following conditions precedent have been satisfied on or
before 31 December 2010 (“Conditions Precedent Period of Axis
Technology Centre Agreement”):
(a)
the approval of the Unitholders by way of an ordinary resolution at a
Unitholders’ meeting to be convened for the Proposed Axis
Technology Centre Acquisition;
(b)
the consent of the chargee for the sale of the Axis Technology
Centre by DTSB to the Trustee;
(c)
the Trustee obtaining the approvals for the Final Tranche Proposed
Placement from Bursa Securities and the Unitholders, and upon the
successful placement of the Final Tranche Placement Units and the
proceeds from the Final Tranche Proposed Placement being duly
received by the Trustee by 31 December 2010;
(d)
the approval of the shareholders in general meeting of DTSB for the
sale of the Axis Technology Centre to the Trustee upon the terms
and conditions of Axis Technology Centre Agreement (if required) or
DTSB’s company secretary’s confirmation that the members’
approval is not required for the sale of the Axis Technology Centre;
(e)
DTSB’s board of directors’ resolution approving the sale of the Axis
Technology Centre to the Trustee upon the terms and conditions of
Axis Technology Centre Agreement;
(f)
stamped copy of the existing lease agreements and existing tenancy
agreements with the novation agreements duly executed by the
existing tenants or existing lessees and DTSB, being deposited with
the Trustee’s solicitors as stakeholders;
(g)
the Repairs of Axis Technology Centre being completed by DTSB to
the reasonable satisfaction of the Trustee;
(h)
written confirmation from DTSB, as at the date the last condition
precedent of the Axis Technology Centre Agreement having been
fulfilled, that it has not received any notification from the existing
tenants and existing lessees for the early termination of the existing
tenancy agreements and existing lease agreements;
(i)
a letter of confirmation from the Trustee issued to Meteorix Sports
Sdn Bhd (“Meteorix”) and the acceptance by Meteorix to renew the
tenancy for a 3 year period commencing from 1 June 2010
(“Extended Tenancy”) based on the similar terms and conditions of
the tenancy agreement dated 19 April 2007 together with the due
execution in escrow of the novation agreement of the Extended
Tenancy by Meteorix and DTSB consenting to the novation of all
rights, benefits and interest of the Extended Tenancy from DTSB to
the Trustee, and to be delivered and held by the Trustee’s solicitors
as stakeholder in accordance to the provisions of the Axis
Technology Centre Agreement; and
(j)
the approval, consent or authorisation of any other relevant authority
and/or parties not specifically mentioned above (if required) as may
be advised by the Trustee’s solicitors to DTSB’s solicitors within 3
months from the date of Axis Technology Centre Agreement, failing
which it shall be deemed that no such additional approvals or
consents from authorities are required for the sale and purchase of
Axis Technology Centre.
2.2.5
Other than as disclosed in Sections 2.2.3 and 2.2.4 above, Axis-REIT will not be
assuming any liability (including contingent liabilities and guarantees) under the
Proposed Axis Technology Centre Acquisition.
2.2.6
The Fund does not need to incur any additional financial commitment to put Axis
Technology Centre on-stream.
2.2.7
Axis Technology Centre consists of a parcel of leasehold land erected with an
industrial complex comprising a 6-storey office building with a basement car park, a
single-storey warehouse, a double-storey warehouse with rooftop car park and other
ancillary buildings with a gross floor area of about 20,055 square metres (equivalent
to 215,868 square feet).
Other pertinent information on Axis Technology Centre is as follows:
Postal address
:
No. 13, Jalan 225
Section 51A, 46100 Petaling Jaya
Selangor Darul Ehsan
Land title details
:
H.S.(D) 167497, PT No. 13, Town of Petaling Jaya,
District of Petaling, State of Selangor Darul Ehsan
Tenure
:
Leasehold for 99 years, expiring on 23 January 2067
(i.e. an unexpired term of 57 years remaining)
Title land area
:
About 16,713 square metres
Registered owner
:
DTSB
Approximate age of building
:
(i)
6-storey office building with basement car
park: newly completed (less than a year);
(ii)
Double-storey warehouse: newly completed
(less than a year); and
(iii)
Single-storey warehouse: over 20 years old
(in good condition)
Gross floor area
:
Net lettable area
About 20,055 square metres (equivalent to 215,868
square feet)
About 15,861 square metres (equivalent to 170,730
square feet)
Category of land use
:
Industrial
Property use
:
Office and warehouse
Cost of investment/Net book
value
:
RM35.8 million based on the unaudited financial
statements of DTSB for the financial year ended 31
December 2009. The total cost of investment after
taking into account the total construction cost of the
newly completed buildings which was incurred
subsequent to the financial year ended 31 December
2009 is estimated to be about RM36.8 million.
Encumbrances
:
Charged to Ambank (M) Berhad vide Presentation
Nos. 94510/2006 and 66949/2008, which were
registered on 17 October 2006 and 21 July 2008
respectively
Restriction in interest
:
Nil
Average occupancy rate
:
89% for the period ended 31 May 2010. Upon
completion of the Proposed Axis Technology Centre
Acquisition, Axis Technology Centre will be fully
occupied (1)
Tenancy description
:
The industrial complex maintains a diversified mix of
well established tenants. Fresenius Medical Care
Malaysia Sdn Bhd, Meteorix, Sigma Elevator (M) Sdn
Bhd, Fresenius Kabi Malaysia Sdn Bhd, Telnetintl Sdn
Bhd and Packet One Networks (Malaysia) Sdn Bhd
are the tenants of the Axis Technology Centre.
The average monthly gross rental per square feet in
Axis Technology Centre for the office and warehouse
is RM2.95 and RM1.60 respectively, for the period
ended 31 May 2010.
Net yield before Islamic financing
cost
:
8.1% per annum
Note:
(1)
3.
Based on the condition as set out in Section 2.2.4(i)(c) above.
INFORMATION ON CLSB AND DTSB
3.1
CLSB
CLSB was incorporated in Malaysia under the Companies Act, 1965 (“Act”) on 8 January
1993 as a private limited company under its present name. As at 14 May 2010, its authorised
share capital is RM1,000,000 comprising 1,000,000 ordinary shares of RM1.00 each while its
issued and paid-up share capital is RM999,996 comprising 999,996 ordinary shares of
RM1.00 each.
The principal activities of CLSB are investment holding and letting of properties.
CLSB is a company in which the following Directors and ultimate major shareholders of the
Manager, who are also the major Unitholders, have interest by virtue of their shareholdings
and directorships in CLSB:
3.2
Interested parties
Nature of interest
(i)
Dato’ Abas Carl Gunnar bin Abdullah
Director and major shareholder of CLSB
(ii)
Tew Peng Hwee @ Teoh Peng Hwee
Director and major shareholder of CLSB
DTSB
DTSB was incorporated in Malaysia under the Act on 25 January 2006 as a private limited
company under its present name. As at 14 May 2010, its authorised share capital is
RM100,000 comprising 100,000 ordinary shares of RM1.00 each while its issued and paid-up
share capital is RM2 comprising 2 ordinary shares of RM1.00 each.
The principal activity of DTSB is property investment.
DTSB is a company in which the following Directors and ultimate major shareholders of the
Manager, who are also the major Unitholders, have interest by virtue of their shareholdings
and/or directorships in DTSB:
Interested parties
Nature of interest
(i)
Dato’ Abas Carl Gunnar bin Abdullah
Director and ultimate major shareholder of
DTSB
(ii)
Tew Peng Hwee @ Teoh Peng Hwee
Director and ultimate major shareholder of
DTSB
(iii)
Alex Lee Lao
Ultimate major shareholder of DTSB
Lao, Yin Yong Lee, who is the brother of Alex Lee Lao, is a person connected to Alex Lee
Lao. As such, he is deemed interested in the Proposed Axis Technology Centre Acquisition.
4.
DETAILS OF THE FINAL TRANCHE PROPOSED PLACEMENT
4.1
Background of the Final Tranche Proposed Placement
On 4 August 2008, on behalf of the Board, Maybank IB announced, among others, that the
Fund proposes to undertake a proposed placement of up to 120,000,000 new Units
(“Placement Units”) (“Proposed Placement”) and proposed increase in the existing
approved fund size of Axis-REIT of 255,901,000 Units up to a maximum of 375,901,000
Units.
In the same announcement, it was stated that the Proposed Placement may be implemented
in multiple tranches whenever the Manager anticipates that the bank borrowings of the Fund
will exceed 40% of the total assets of the Fund as a result of future acquisitions.
Subsequently, the Board had proposed to lower the internal gearing limit of Axis-REIT from
40% to 35% as a prudent measure given that the global financial crisis and deteriorating
global economic outlook has created uncertainty in the domestic capital market, which was
announced on 20 July 2009. A circular to the Unitholders dated 5 August 2009 was
subsequently issued for a Unitholders’ meeting to be convened on 20 August 2009 for the
purpose of seeking a general mandate from the Unitholders to issue 51,180,200 new Units,
st
being the first tranche of the Placement Units (“1 Tranche Placement Units”).
The 1st Tranche Placement Units were issued at an issue price of RM1.66 per Unit on 9
September 2009.
Based on the latest unaudited quarterly results of Axis-REIT for the financial period ended 31
March 2010, Axis-REIT’s gearing level stood at 35.43% and taking into the consideration the
proposed acquisition by the Trustee, on behalf of Axis-REIT, of a portion of land identified as
Plot D8, Distripark A, Pelepas Free Zone, Johor together with a single storey industrial
warehouse and two (2) storey office buildings erected thereon (“Proposed Warehouse
Acquisition”) which was announced on 20 April 2010, the gearing level is expected to
increase to about 37%. In view of this, the Board is of the opinion that it is timely to implement
the final tranche of the Proposed Placement in order to pare down part of Axis-REIT’s bank
borrowings and to provide headroom for the Proposed Acquisitions. As a result the Fund now
proposes to undertake the Final Tranche Proposed Placement and Proposed Increase In
Fund Size.
On 12 March 2010, the Manager, on behalf of Axis-REIT, obtained the approval from the
Securities Commission (“SC”) for an exemption from complying with Clause 14.04(a)(i) to (iii)
of the Guidelines on Real Estate Investment Trusts issued by the SC (“REITs Guidelines”).
Clause 14.04(a)(i) to (iii) of the REITs Guidelines states that where an issue of units departs
from any of the applicable requirements stipulated in Clause 14.03 of the REITs Guidelines,
the management company must obtain unitholders’ approval by way of an ordinary resolution
for the precise terms and conditions of the issue, in particular on the following:
(i)
(ii)
(iii)
the persons to whom the units will be issued/placed;
the amount of units to be placed to each of them; and
issue price of the units or, in a situation where such prices are to be determined after
the date of the unitholders’ approval, the basis or formula of determining such prices.
The condition imposed by the SC for the abovementioned exemption is as follows:
4.2
Condition imposed
Status of compliance
The placement to each public institution must be limited to 25% of the
Final Tranche Placement Units
To be complied
Number of Final Tranche Placement Units
The Final Tranche Proposed Placement entails the issuance of up to 68,819,800 new Units
to placees to be identified later. This represents an increase of about 22.4% over the existing
fund size of Axis-REIT of 307,081,200 Units.
The actual number of the Final Tranche Placement Units to be issued pursuant to the Final
Tranche Proposed Placement will be determined later by the Manager, in consultation with
the placement agent to be appointed for the Final Tranche Proposed Placement, at a pricefixing date to be determined later after the approval from the Unitholders have been obtained.
In any event, the number of new Units to be issued under the Final Tranche Proposed
Placement will not exceed 68,819,800 new Units. The Final Tranche Proposed Placement
will be placed out to placees to be identified later.
4.3
Issue price of the Final Tranche Placement Units
The issue price of the Final Tranche Placement Units will be determined based on the 5-day
volume weighted average market price (“VWAMP”) of the Units at a discount to be
determined later, immediately prior to the price-fixing date.
The issue price of the Final Tranche Placement Units will be determined by the Manager, in
consultation with the placement agent to be appointed for the Final Tranche Proposed
Placement, at a price-fixing date to be determined later.
4.4
Status and ranking of the Final Tranche Placement Units
The Final Tranche Placement Units shall, upon allotment and issue rank equally in all
respects with the existing Units except that the Final Tranche Placement Units will not be
entitled to any distributable income, right, allotment and/or any other distributions that may be
declared prior to the date of allotment of the Final Tranche Placement Units.
An application will be made to Bursa Securities for the listing of and quotation for the Final
Tranche Placement Units on the Main Market of Bursa Securities.
4.5
Utilisation of proceeds
For illustrative purpose, assuming the Final Tranche Placement Units are issued at an issue
price of RM1.89 per Unit (representing a discount of 5% to the 5-day VWAMP of the Units up
to 2 June 2010, being the last trading day immediately prior to the announcement of the Final
Tranche Proposed Placement), the Final Tranche Proposed Placement will raise gross
proceeds of about RM130.07 million.
The proceeds after deducting estimated expenses in relation to the Final Tranche Proposed
Placement will be utilised for repayment of part of Axis-REIT’s bank borrowings.
5.
DETAILS OF THE PROPOSED INCREASE IN FUND SIZE
In order to accommodate the issuance of the Final Tranche Placement Units, the Manager is
proposing to increase the existing fund size of Axis-REIT of 307,081,200 Units up to a maximum of
375,901,000 Units.
6.
CONDITIONALITY
The Proposed Axis PDI Centre Acquisition and Proposed Axis Technology Centre Acquisition are not
conditional upon each other. However, the Proposed Acquisitions are conditional upon the Final
Tranche Proposed Placement and Proposed Increase in Fund Size.
The Final Tranche Proposed Placement and the Proposed Increase In Fund Size are interconditional. Upon implementation of the Final Tranche Proposed Placement and the Proposed
Increase In Fund Size, the Proposed Placement will be completed.
7.
RATIONALE FOR THE PROPOSALS
7.1
Proposed Acquisitions
The Proposed Acquisitions are in line with the Manager’s investment objectives and the
growth strategy of Axis-REIT to provide the Unitholders with stable income distribution and to
achieve growth in the net asset value (“NAV”) per Unit, by acquiring high quality, earnings
accretive properties with strong recurring rental income. The Proposed Acquisitions will be
accretive to Axis-REIT’s distributable income.
Furthermore, the Proposed Acquisitions would enable Axis-REIT to diversify and enlarge its
portfolio of properties and is expected to benefit the Fund in the long-term as a result of
economies of scale.
7.2
Final Tranche Proposed Placement
After due consideration of the various funding options available, the Board is of the view that
the Final Tranche Proposed Placement is currently the most appropriate avenue of fund
raising for the following reasons:
(i)
the Final Tranche Proposed Placement will enable Axis-REIT to raise funds to pare
down its borrowings which will exceed 35% of the total assets of Axis-REIT as a
result of acquisitions of new properties. This will provide Axis-REIT with sufficient
headroom for the Proposed Acquisitions and also to make future cash acquisitions,
which is in line with the growth strategy of Axis-REIT; and
(ii)
7.3
the Final Tranche Proposed Placement will involve the issuance of new Units which
will increase the number of Units in circulation and will improve the trading liquidity of
Axis-REIT.
Proposed Increase In Fund Size
The Proposed Increase In Fund Size is to accommodate the issuance of the Final Tranche
Placement Units under the Final Tranche Proposed Placement.
8.
PROSPECTS AND RISK FACTORS
8.1
Prospects
The Board believes that the combination of high demand for industrial properties in these
locations together with the scarcity of available sites would suggest that Axis PDI Centre and
Axis Technology Centre should continue to attract demand. Hence, the Board believes that
the Proposed Acquisitions will contribute positively to the future performance of the Fund.
8.2
Risks factors
Some of the risk factors (which may not be exhaustive) pertaining to the Proposed
Acquisitions are as follows:
9.
(i)
gross rental income and the value of the Axis PDI Centre and Axis Technology
Centre may be affected by a number of factors;
(ii)
the Axis PDI Centre and Axis Technology Centre may be uninsured or under-insured
losses;
(iii)
compulsory acquisition by the Malaysian Government;
(iv)
single customer tenanted property for Axis PDI Centre;
(v)
the sale price for the Axis PDI Centre and Axis Technology Centre may be less than
the current valuation or the purchase price paid by Axis-REIT; and
(vi)
losses or liabilities from latent building or equipment defects may adversely affect
earnings and cash flow.
EFFECTS OF THE PROPOSALS
9.1
Unitholders’ capital
The proforma effects of the Proposals on the unitholders’ capital of Axis-REIT are set out in
Table 1.
9.2
Distributable income
The Manager has declared and paid an income distribution of 15.8 sen per Unit for the
financial year ended 31 December 2009 (equivalent to 99% of Axis-REIT’s earnings before
tax). Barring unforeseen circumstances, the Manager intends to distribute at least 99% of the
distributable income of Axis-REIT for the financial year ending 31 December 2010.
The Proposals are not expected to have any material effect on Axis-REIT’s distributable
policy as determined by the Board. The decision to declare and pay distributable income in
the future would depend on the financial performance and cash flow position of Axis-REIT,
and prevailing economic conditions.
9.3
Substantial Unitholders’ unitholdings
The proforma effects of the Proposals on the substantial Unitholders’ unitholdings are set out
in Table 2.
9.4
Earnings per Unit
The Manager expects to complete the Final Tranche Proposed Placement by the fourth
quarter of 2010. As such the Final Tranche Proposed Placement is not expected to have a
material effect on Axis-REIT’s earnings for the financial year ending 31 December 2010.
Nevertheless, any dilution as a result of the increase in the number of Units in issue pursuant
to the Final Tranche Proposed Placement is expected to be offset by improved earnings of
the Fund attributable to the Proposed Acquisitions.
Moving forward, the effect of the Proposals on the earnings of the Fund will depend on the
contribution from the Fund’s existing real estate properties and the finance cost savings
arising from the repayment of bank borrowings using the proceeds from the Final Tranche
Proposed Placement.
9.5
NAV per Unit and gearing
The proforma effects of the Proposals on the NAV per Unit and gearing of Axis-REIT based
on the audited financial statements of Axis-REIT as at 31 December 2009 are set out in
Table 3.
10.
APPROVALS REQUIRED
In addition to the approvals/consents as set out in Sections 2.1.4(ii) and 2.2.4(ii) above, the
Proposals are also subject to the following approvals being obtained:
10.1
10.2
Proposed Acquisitions
(i)
OSK Trustees Berhad, being the Trustee of the Fund, which was obtained on 27
May 2010;
(ii)
Islamic Banking And Finance Institute Malaysia Sdn Bhd, as the Shariah Adviser for
Axis-REIT, which was obtained on 25 May 2010; and
(iii)
any other relevant regulatory authorities or parties, if required.
Final Tranche Proposed Placement and Proposed Increase In Fund Size
(i)
OSK Trustees Berhad, being the Trustee of the Fund, which was obtained on 27
May 2010;
(ii)
SC for the following:
(a)
the issuance of the new Units pursuant to the Final Tranche Proposed
Placement;
(b)
the listing of and quotation for the Final Tranche Placement Units on the
Main Market of Bursa Securities; and
(c)
the increase in the existing approved fund size of Axis-REIT from
307,081,200 Units up to a maximum of 375,901,000 Units;
The approval of the SC was obtained on 2 September 2008, 23 February 2009 and
21 August 2009;
(iii)
Bursa Securities for the listing of and quotation for the Final Tranche Placement Units
on the Main Market of Bursa Securities; and
(iv)
Unitholders at a Unitholders’ meeting to be convened.
The applications to the relevant authorities are expected to be submitted within 2 months from the
date of this announcement.
11.
INTERESTS OF THE DIRECTORS AND MAJOR SHAREHOLDER OF THE MANAGER, AND
MAJOR UNITHOLDERS
11.1
Proposed Acquisitions
Other than as disclosed below, none of the Directors and major shareholder of the Manager,
major Unitholders and/or persons connected to them have any interest, direct or indirect, in
the Proposed Acquisitions.
(i)
Dato’ Abas Carl Gunnar bin Abdullah, the Executive Deputy Chairman of the
Manager is also one of the ultimate major shareholders of the Manager and a major
Unitholder, having an indirect interest of 17.5% in the Manager and direct interest of
5.45% in the Fund as at 31 May 2010. He is also a Director and major shareholder of
CLSB; and a Director and ultimate major shareholder of DTSB, the respective
vendors to the Axis PDI Centre Agreement and Axis Technology Centre Agreement;
(ii)
Tew Peng Hwee @ Teoh Peng Hwee, the Non-Independent Non-Executive Director
of the Manager is also one of the ultimate major shareholders of the Manager and a
major Unitholder, having an indirect interest of 20.0% in the Manager and direct
interest of 9.00% in the Fund as at 31 May 2010. He is also a Director and major
shareholder of CLSB; and a Director and ultimate major shareholder of DTSB, the
respective vendors to the Axis PDI Centre Agreement and Axis Technology Centre
Agreement.
(iii)
Alex Lee Lao, an alternate director to Dato’ Abas Carl Gunnar bin Abdullah is also
one of the ultimate major shareholders of the Manager and a major Unitholder,
having an indirect interest of 17.5% in the Manager and direct interest of 7.76% in the
Fund as at 31 May 2010. He is also an ultimate major shareholder of DTSB, the
vendor to the Axis Technology Centre Agreement.
(iv)
Lao, Yin Yong Lee, the Non-Independent Non-Executive Director and a member of
the Audit Committee of the Manager, who is the brother of Alex Lee Lao is deemed
interested in the direct and indirect interests of Alex Lee Lao in the Fund. He has a
direct interest of 0.13% in the Fund as at 31 May 2010.
Dato’ Abas Carl Gunnar bin Abdullah and Tew Peng Hwee @ Teoh Peng Hwee are deemed
interested in the Proposed Axis PDI Centre Acquisition. They have abstained and will
continue to abstain from deliberating and voting on the resolutions pertaining to the Proposed
Axis PDI Centre Acquisition at the relevant Board meetings. They will abstain and have also
undertaken to ensure that persons connected to them will abstain from voting in respect of
their direct and/or indirect unitholdings on the resolutions pertaining to the Proposed Axis PDI
Centre Acquisition.
Dato’ Abas Carl Gunnar bin Abdullah, Tew Peng Hwee @ Teoh Peng Hwee, Alex Lee Lao
and Lao, Yin Yong Lee are deemed interested in the Proposed Axis Technology Centre
Acquisition. They have abstained and will continue to abstain from deliberating and voting on
the resolutions pertaining to the Proposed Axis Technology Centre Acquisition at the relevant
Board meetings. They will abstain and have also undertaken to ensure that persons
connected to them will abstain from voting in respect of their direct and/or indirect
unitholdings on the resolutions pertaining to the Proposed Axis Technology Centre
Acquisition.
11.2
Final Tranche Proposed Placement and Proposed Increase In Fund Size
Given that the Proposed Acquisitions are conditional upon the Final Tranche Proposed
Placement and Proposed Increase in Fund Size, Dato’ Abas Carl Gunnar bin Abdullah, Tew
Peng Hwee @ Teoh Peng Hwee, Alex Lee Lao and Lao, Yin Yong Lee are deemed
interested in the Final Tranche Proposed Placement and Proposed Increase In Fund Size.
Accordingly, they have abstained and will continue to abstain from deliberating and voting on
the resolutions pertaining to the Final Tranche Proposed Placement and Proposed Increase
In Fund Size at the relevant Board meetings. They will abstain and have also undertaken to
ensure that persons connected to them will abstain from voting in respect of their direct
and/or indirect unitholdings on the resolutions pertaining to the Final Tranche Proposed
Placement and Proposed Increase In Fund Size.
12.
TOTAL AMOUNT TRANSACTED BETWEEN AXIS-REIT, CLSB AND DTSB FOR THE
PRECEDING 12 MONTHS
Other than transactions under the ordinary course of business, Axis-REIT had no transactions with
CTSB and DTSB in the 12 months preceding the date of this announcement.
13.
RELATED PARTY TRANSACTIONS
With reference to Section 11 above, the Proposed Acquisitions are deemed to be related party
transactions under Chapter 9 of the REITs Guidelines.
14.
DIRECTORS’ STATEMENT
The Board (other than the interested persons as disclosed in Section 11 above (where applicable)),
having considered all aspects of the Proposals and after careful deliberation, is of the opinion that the
Proposals are in the best interest of the Fund.
15.
AUDIT COMMITTEE’S STATEMENT
The Audit Committee of the Manager (save for Lao, Yin Yong Lee who is deemed interested in the
Proposed Axis Technology Centre Acquisition), after taking into account the Manager’s investment
objectives and the growth strategy of Axis-REIT, and having considered all aspects of the Proposed
Acquisitions, including the purchase consideration, is of the opinion that the Proposed Acquisitions
are:
16.
(i)
in the best interest of the Fund;
(ii)
fair and reasonable and on normal commercial terms; and
(iii)
not detrimental to the interest of the Unitholders.
ADVISER
The Manager has appointed Maybank IB as the adviser for the Proposals.
17.
ESTIMATED TIMEFRAME FOR COMPLETION
Barring any unforeseen circumstances and subject to all approvals being obtained, the Proposals are
expected to be completed by the fourth quarter of 2010.
18.
DOCUMENTS AVAILABLE FOR INSPECTION
The Axis PDI Centre Agreement, Axis Technology Centre Agreement and valuation reports dated 3
May 2010 and 4 May 2010 in respect of Axis PDI Centre and Axis Technology Centre respectively,
are available for inspection at the registered office of the Manager at Suite 11.1A Level 11, Menara
Weld, 76 Jalan Raja Chulan, 50200 Kuala Lumpur during normal business hours from Mondays to
Fridays (except for public holidays) for a period of 3 months from the date of this announcement.
This announcement is dated 3 June 2010.
Table 1: Units
No. of Units
Existing as at 31 May 2010
307,081,200
To be issued under the Final Tranche Proposed Placement
(1)
68,819,800
Enlarged Unitholders’ capital
375,901,000
Note:
(1)
Assuming the maximum number of Final Tranche Placement Units are issued.
The Proposed Acquisitions will not have any effect on the Unitholders’ capital as Axis-REIT will satisfy the
Purchase Price of Axis PDI Centre and Purchase Price of Axis Technology Centre in cash.
Table 2: Substantial Unitholders’ unitholdings
Based on the Record of Depositors of Axis-REIT as at 31 May 2010, the proforma effects of the Proposals on
Axis-REIT’s substantial Unitholders’ direct unitholdings in Axis-REIT are as follows:
After the Final Tranche
Proposed Placement (1)
As at 31 May 2010
Substantial Unitholders
After the Proposed
Acquisitions
No. of Units held
%
No. of Units held
%
No. of Units held
%
Employees Provident
Fund Board
33,621,400
10.95
33,621,400
10.95
33,621,400
8.94
Tew Peng Hwee @ Teoh
Peng Hwee
27,650,000
9.00
27,650,000
9.00
27,650,000
7.36
Dato’ Abas Carl Gunnar
bin Abdullah
16,735,400
5.45
16,735,400
5.45
16,735,400
4.45
Alex Lee Lao
23,819,100
7.76
23,819,100
7.76
23,819,100
6.34
Note:
(1)
Assuming none of the substantial Unitholders subscribe for the Final Tranche Placement Units.
Table 3: NAV and gearing
Significant events previously announced
After the Proposed
Audited as at After the completed
Warehouse
31 December 2009
acquisition (1)
Acquisition
RM’000
RM’000
RM’000
Unitholders’ capital
Undistributed distributed income
406,854
179
534,573
552,157
552,657
680,376
686,276
688,576
307,081
307,081
307,081
375,901
375,901
375,901
1.7922
1.7981
1.7997
1.8100
1.8257
1.8318
Number of Units in circulation (‘000)
Gearing (9)
534,573
179
550,357
Total assets
534,573
145,624
NAV
179
(4)
179
143,324
Total borrowings
406,854
145,624
Non-distributable reserve
NAV per Unit (RM)
406,854
Proposals
After the Final
After the After the Proposed
Tranche Proposed Proposed Axis PDI
Axis Technology
Placement Centre Acquisition Centre Acquisition
RM’000
RM’000
RM’000
(2)
308,932
(2)
907,745
(2)
34.03
145,124
(3)
333,632
(3)
934,245
(3)
35.71
364,132
(5)
(6)
179
(7)
(7)
236,413
965,245
965,245
37.72
24.49
(7)
179
(8)
151,524
(8)
322,513
1,057,245
30.51
(8)
153,824
372,213
1,109,245
33.56
Notes:
Significant events previously announced
(1)
After taking into account the acquisition of the 2 Seberang Perai Logistic Warehouses (from IDS Logistics Services (M) Sdn Bhd), which was completed on 5 March
2010.
(2)
Incorporates the impact on borrowings and total assets in relation to the total purchase consideration of RM24.7 million (inclusive of estimated expenses about
RM0.45 mil) and fair value adjustment of RM1.8 million on the completed acquisition of the 2 Seberang Perai Logistic Warehouses.
(3)
Incorporates the impact on borrowings and total assets in relation to the total purchase consideration of RM30.5 million (inclusive of estimated expenses about
RM0.5 million for the Proposed Warehouse Acquisition) and fair value adjustment of RM0.5 million on the Proposed Warehouse Acquisition.
Proposals
(4)
Assuming up to a maximum of 68,819,800 Final Tranche Placement Units are issued at an issue price of RM1.89 per Unit (representing a discount of 5% to the 5day VWAMP of the Units up to 2 June 2010, being the last trading day immediately prior to the announcement of the Final Tranche Proposed Placement) and after
netting-off estimated expenses for the Proposals of RM2.35 million.
(5)
After taking into account the maximum of 68,819,800 Final Tranche Placement Units.
(6)
Assuming the entire net proceeds from the Final Tranche Proposed Placement will be utilised for the repayment of part of Axis-REIT’s bank borrowings.
(7)
Incorporates the impact on borrowings and total assets in relation to the total purchase consideration of RM86.1 million (inclusive of estimated expenses of about
RM1.1 million for the Proposed Axis PDI Centre Acquisition) and fair value adjustment of RM5.9 million on the Proposed Axis PDI Centre Acquisition.
(8)
Incorporates the impact on borrowings and total assets in relation to the total purchase consideration of RM49.7 million (inclusive estimated expenses of about
RM0.7 million for the Proposed Axis Technology Centre Acquisition) and fair value adjustment of RM2.3 million on the Proposed Axis Technology Centre
Acquisition.
(9)
Total borrowings divided by total assets.